Billion USD grocery chains operate on 2-3% margins just fine...

If you're a grocery chain you know exactly how much an item costs and exactly how much you sell it for. You also simply order more or less stock of the item depending on how it's selling.

If you're a video game company, you invest millions of dollars in a project up front, for years, and you don't know until after release whether you:

- Make back all the money you spent plus a healthy profit on top.

- Just break even, but you lost the opportunity cost of all the other things that money could have been spent on with better utility.

- Your game flops and you wasted all the money you spent developing it.

It's also highly uneven. Extremely likely that King (Candy Crush) and Mojang (Minecraft) are making a ton of money, and everything else is a money pit where you pour in millions of dollars and you don't even make your money back.

food demand is pretty inelastic their margins are low but they're fairly consistent. modern games can have budgets of a few hundred million dollars with absolutely no guarantee of sales. at those margins 1 failed triple ai have could wipe out several years of profits.

Yeah, because video games are as essential to the home as groceries.

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